PREMIER CONSTRUCTION CO Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is a reference made under Section 66(2) of the Indian Income-tax Act by the Tribunal of Appeal. The question submitted for the Court's opinion is in these terms: Whether in the circumstances of this case that portion of the income received by the assessee from the principal company of Marsland Price & Co., Ltd., which is proportionate to the agricultural income earned by the principal company is agricultural income, within the meaning of Section 2(1) of the Indian Income-tax Act, 1922, and exempt from assessment under the provisions of Section 4(3)(viii) of the Act?

(2.) The relevant material facts are these : The assessees, a limited company, are the managing agents of Messrs. Marsland, Price & Co., Ltd. (referred to as the principal company in the reference). The assessees were appointed managing agents under a contract. Clause 2 of that contract is as follows: A commission at the rate of ten per cent. per annum on the annual nett profits of the said company after making all proper allowances and deductions from revenue for working expenses chargeable against profits but without making any deduction for depreciation or in respect of any amount carried to reserve or sinking fund or any payment on account of super-tax or any deduction for expenditure on capital account, provided that such commission shall not in any year amount to a less sum than Rupees ten thousand.

(3.) The original agreement was between the principal company and The Tata Construction Co., Ltd., which was the trade name of the assessees, before the one now adopted by them. The principal company derives its income from several sources, one of which is manufacture of sugar. The cane that is used in manufacture is partly grown on the company's own farms and partly bought from outside. In the statement of case it is noted that a part of the principal company's income from this source, i.e. the part that is attributable to the manufacture from the cane grown on the company's farms is exempted from income-tax, under Section A(3) (viii) of the Act as agricultural income within the meaning of Section 2(1).